NEW YORK, NY -- Powered by the robust sectors of technology, health care and communication industries, Westchester’s commercial real estate markets are in good health and enjoying the support of continued economic expansion, according to the Q3 Commercial Market Report from Houlihan Lawrence’s Commercial Group.
Westchester office and retail markets showed positive absorption rates in the third quarter. Some price concessions appear to have emerged as landlords seek better occupancy rates. The Market Report, which was written by Teresa Marizano of the Commercial Group, identified the following trends:
Apartment demand continues to grow in Westchester
Affordability and lifestyle flexibility have kept apartments as an attractive choice for new households in Westchester. Year-to-date absorption of newly delivered apartment units south of I-287 has weakened from the record-breaking 2016 level of 961 units to a still strong 730, or 1 percent of stock.
Developers are acquiring sites near transportation hubs, which renters prefer, and these hubs are also drawing restaurants and retailers to create a concentration of amenities that draws consumers of all ages and strengthens overall real estate demand.
Warehouse space demand continues to exceed supply
In Westchester areas south of I-287, the industrial sector has benefitted from new retail consumption patterns that require direct fulfillment from distribution centers. Industrial and flex properties achieved price gains of 6.8 percent compared to a year ago.
Other uses of retail space are emerging
With the eroding demand for traditional store-based retailers, other uses for these spaces are emerging, including niche fitness offerings, urgent care centers, physician offices, and specialized tutoring services.
Weaker investment activity in Q3
Low compensation for risk in today’s real estate pricing, changes in the interest rate environment, and uncertainty about possible tax code changes are some of the reasons behind investor hesitation.
“Westchester real estate fundamentals are making solid gains. However, despite a healthy economy, investment sales are only 36% of the third quarter of 2016 level. Buyers and sellers continue to struggle to find common pricing ground that can lead to a transaction. Real estate income drivers are changing and these changes have increased investors’ risk perception,” said Thomas LaPerch, Director of the Commercial Group. “However, we continue to think economic growth will encourage buyers to be more optimistic about real estate income prospects. At the same time, changes in the interest rate environment may act to motivate some owners to capture today’s robust pricing,” he added.